Exploring a Novel Agricultural Subsidy Model with Sustainable Development: A Chinese Agribusiness in Liaoning Province

Abstract

To improve the incomes of farmers in China, the Chinese government is paying increased attention to the reform of its agricultural subsidy policy. However, the effectiveness of the subsidy remains insufficient and thus fails to encourage farmers to cultivate their land and develop sustainability. Thus, there is a need for a novel model that will improve the effectiveness and efficiency of subsidies. The proposed novel agricultural subsidy model comprises four major actors: farmers, specialized farmers’ cooperatives, agribusiness and government. Furthermore, the subsidy in this novel model would no longer go directly to farmers but to the agribusiness. To develop the model, the empirical data for this study are obtained from a Chinese agribusiness in Liaoning Province that was selected as a benchmark. With this novel model, farmers receive triple rebates: the price received when the rice is initially sold; a share of the profits of the specialized farmers’ cooperatives; and a share of the profits of the agribusiness. Accordingly, exploring the optimal subsidy rate for agribusinesses is the critical task of this study, and the results demonstrate that agribusinesses must use the government subsidy policy as the basis for a dynamic subsidy model that ensures the income of farmers and encourages sustainable development.